TRANSITION SERVICES AND
SEPARATION AGREEMENT
THIS TRANSITION
SERVICES AND SEPARATION AGREEMENT (“Agreement”) is
executed as of August 5, 2009 (“Agreement Date”),
by and between Terence W. Edwards (“Edwards”) and PHH
Corporation (the “Company”).
WHEREAS, Edwards
resigned as President and Chief Executive Officer of the Company,
effective June 17, 2009; and
WHEREAS, the
parties desire to (i) set forth the terms pursuant to which
Edwards’ employment will continue while the Company conducts
a search for a new Chief Executive Officer, and (ii) provide for
certain payments and benefits as consideration for Edwards’
agreement to certain restrictive covenants and his execution of a
general release of claims.
NOW THEREFORE,
intending to be legally bound hereby, the Company and Edwards agree
as follows:
Transition
Services and Last Day of Employment
Edwards’
employment with the Company and any of its subsidiaries and
affiliates will terminate on earlier of (i) the date that a
new Chief Executive Officer of the Company is appointed, or (ii)
December 31, 2009 (such date of termination is referred to
herein as the “Termination Date”). From the Agreement
Date through the Termination Date (the “Transition
Period”), Edwards will perform such services as reasonably
requested by the Board of Directors or Acting Chief Executive
Officer of the Company to assist in the transition to a new Chief
Executive Officer.
During the
Transition Period, the Company will continue to pay Edwards’
annual base salary of $564,635 as in effect as of the Agreement
Date (the “Base Salary”), payable bi-weekly in
accordance with the Company’s normal payroll practices. In
addition, during the Transition Period, (x) Edwards may continue to
participate in the Company’s health and welfare benefit plans
and 401(k) plan, subject to the terms of the plans, and
(y) the Company shall provide the use of a Company vehicle,
financial planning services, and tax reimbursements on the
foregoing perquisites, to the extent provided to senior executives
of the Company, and subject to the Company’s policies and
procedures. At the end of the Transition Period, Edwards shall
return the Company-provided vehicle.
In consideration
of Edwards’ execution of and failure to revoke the Release
Agreement contained in Exhibit A to this Agreement (the
“Release”), and his continued compliance with the terms
and conditions of this Agreement, the Company agrees to pay or
provide the following payments and benefits:
(a) Pay to
Edwards severance in an amount equal to his Base Salary for the
24-month period beginning on the Termination Date (the
“Severance Period”), with payments beginning
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within
30 days after the Termination Date, provided that Edwards has
signed the Release and it has become irrevocable before the start
of payment. The severance will be payable bi-weekly in accordance
with the Company’s normal payroll practices, however, the
payments scheduled to be paid after the Termination Date and before
the Release becomes irrevocable will not be paid until the first
bi-weekly payroll date on or after the date that the Release
becomes irrevocable.
(b) Pay to
Edwards’s annual cash bonuses for calendar years 2009, 2010,
and 2011 in an amount equal to the bonus Edwards would have
received based on actual performance of the Company. The bonus will
be paid to Edwards at the same time bonuses are payable to
corporate employees, but no later than March 15 after the end
of the applicable performance year. The amount of cash bonus for
2011 will be pro-rated to reflect the actual number of months
covered by the Severance Period in 2011.
(c) Allow
Edwards to continue to vest in any outstanding options or
restricted stock units that have been awarded to Edwards under the
PHH Corporation Amended and Restated 2005 Equity and Incentive Plan
(the “Equity Plan”), subject to the terms and
conditions of the Equity Plan and any award agreement, on the same
basis and at the same time as such awards would have vested had
Edwards remained in the employ of the Company through the Severance
Period. On the last day of the Severance Period, all remaining
outstanding unvested stock options and restricted stock units,
other than 2009 performance-based restricted stock units, will
become fully vested; 2009 performance-based restricted stock units
will become vested on that date to the extent that performance
goals have been satisfied or are expected to be satisfied in the
reasonable discretion of the Compensation Committee.
Mr. Edwards will have the right to exercise any option that is
vested and unexercised as of the Termination Date, as well as any
other option that later vests under the terms of this Agreement,
until the earlier of (1) the date on which such option would
have expired by its original terms or (2) one year after the
Severance Period ends.
(d) Pay the
premium for COBRA coverage, if elected by Edwards and his eligible
dependents, upon loss of coverage under the Company’s group
health plan due to his termination on the Termination Date, until
the earlier of (i) the date that Edwards becomes eligible for
coverage under another group health plan, or (ii) the end of
the 18 month maximum COBRA coverage period. If Edwards does
not become eligible for coverage under another group health plan by
the end of the 18 month maximum COBRA coverage period, then the
Company will continue to provide coverage for Edwards and his
eligible dependents for up to an additional 6 months; however,
the coverage will terminate earlier if Edwards becomes eligible for
coverage under another group health plan during that time. The
Company will impute the amount of the COBRA premium during the
period of COBRA coverage and the fair market value of the continued
coverage beyond the end of the COBRA period as taxable income to
Edwards.
(e) No later
than 35 days after the Termination Date, the Company will pay
to Edwards a lump sum cash transition payment equal to fifty
thousand dollars ($50,000.00).
None of the
foregoing payments or benefits will be made or provided if the
Release is not signed and has not become irrevocable within
30 days after the Termination Date. Payment and provision of
the foregoing benefits are conditioned on Edwards’ continued
compliance with the restrictive covenants in this
Agreement.
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All amounts paid
and property transferred under this Agreement shall be subject to
applicable withholdings for federal, state, and local
taxes.
Edwards
acknowledges that: (A) the payments and benefits set forth in
this Agreement constitute full settlement of all his rights arising
out of his employment with the Company except to matters
specifically preserved herein, (B) he has no entitlement under
any other severance or similar arrangement maintained by the
Company, and (C) except as otherwise provided specifically in
this Agreement, the Company does not and will not have any other
liability or obligation to Edwards. Edwards further acknowledges
that, in the absence of his execution of this Agreement and the
Release, benefits and payments specified in the
“Consideration” section of the Agreement would not
otherwise be due to Edwards.
Edwards is under
no obligation to seek other employment and there shall be no offset
against amounts or benefits due to Edwards under this Agreement as
a result of any compensation that Edwards may earn in connection
with future employment.
In further
consideration for the benefits and payments set forth in this
Agreement, Edwards agrees that, during the Restriction Period (as
defined below), Edwards shall not compete with the Company or any
of its subsidiaries or affiliates (the “PHH Group”), as
set forth below:
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1.
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Edwards agrees that he will not,
directly or indirectly, as an individual on Edwards’ own
account, or as an independent contractor, employee, consultant,
agent, partner, member, joint venturer or otherwise, provide any
service or assistance, in any capacity or function to any business
engaged in any of the businesses of or services provided by or
contemplated to be provided by the PHH Group or otherwise competing
with the businesses of the PHH Group, as in effect on the Agreement
Date or any time during which Edwards provided services to the PHH
Group, including, but not limited to businesses in the fleet
management, mortgage origination and/or mortgage servicing
industries, or any of the following: Mike Albert Leasing, Inc.;
Allstate Leasing, Inc.; ARI (Automotive Rentals, Inc.); Donlen
Corporation; Enterprises Leasing Company; GE Commercial Finance
Fleet Services; Emkay Vehicle Leasing; Lease Plan U.S.A.; Wheels,
Incorporated; American Leasing; BBL; MotoLease; Merchants Leasing;
Sutton Leasing; ULTEA; SunTrust; Wells Fargo; The CEI Group; Fleet
Response; CCM; Union Leasing; Wells Fargo Home Mortgage; Bank of
America Mortgage; Chase Home Finance; CitiMortgage, Inc.; GMAC
Residential Holdings; SunTrust Mortgage, Inc.; MetLife Bank;
Quicken Loans, Inc.; CTX Mortgage; Branch Banking & Trust Co.;
Pulte Mortgage; AmSouth Mortgage; Fifth Third Mortgage; U.S. Bank
Home Mortgage; Citizens Mortgage Corporation; and any successor
entity of any of the foregoing that is created by merger,
consolidation or any other similar transaction. Notwithstanding the
foregoing, nothing in this Agreement shall limit Edwards, as an
individual on Edwards’ own account, or as an independent
contractor, employee, consultant, agent, partner, member, joint
venturer or otherwise, from providing any service or
assistance
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to
government-sponsored enterprises or quasi-governmental agencies,
including, without limitation, Fannie Mae and Freddie Mac, provided
that such enterprise or agency is not engaged in mortgage
origination or mortgage servicing.
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2.
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The
Executive acknowledges that the PHH Group’s businesses are
conducted nationally and agrees that the restrictions herein shall
operate throughout the United States. Nothing herein shall prohibit
Edwards from being a passive owner of not more than five percent
(5%) of the outstanding securities of any publicly traded company
that would be a competing company as described in section 1 above,
so long as Edwards has no active participation in the business of
such company.
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3.
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Edwards agrees that he will not,
directly or indirectly, as an individual on Edwards’ own
account, or as an independent contractor, employee, consultant,
agent, partner, member, joint venturer or otherwise, solicit,
induce or encourage, or permit any person or entity to solicit,
encourage, induce or attempt to induce on Edwards’ behalf
during the Restriction Period:
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(a)
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any
person who was employed by the PHH Group on the Termination Date,
and/or any person who was employed by the PHH Group at any time
during the twelve-month period immediately preceding the
Termination Date, to terminate their employment with the PHH Group,
or in any way interfere with the relationship between the PHH Group
and any employee thereof; or
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(b)
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any
customer, client, supplier, licensee or other person or entity that
does business with the PHH Group to cease doing business with the
PHH Group, or in any way interfere with the relationship between
any such persons or entities and the PHH Group; and
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4.
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Edwards agrees that he will not,
directly or indirectly, as an individual on Edwards’ own
account, or as an independent contractor, employee, consultant,
agent, partner, member, joint venturer or otherwise, during the
Restriction Period, call on, solicit or service any person or
entity who was a customer, client, licensor or licensee of the PHH
Group at any time during the twelve-month period immediately
preceding the Termination Date for any purpose which directly or
indirectly competes with the business of the PHH Group.
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Edwards agrees and
acknowledges that the promises and covenants not to compete set
forth above each have a unique, very substantial and immeasurable
value to the PHH Group, that the PHH Group is engaged in a highly
competitive industry, and that Edwards is receiving significant
consideration in exchange for these promises and covenants. Edwards
acknowledges that the promises and covenants set forth above are
necessary for the reasonable and proper protection of the PHH
Group’s legitimate business interests; and that each and
every promise and covenant is reasonable with respect to activities
restricted, geographic scope and length of time.
The
“Restriction Period” for purposes of these
“Covenants Not to Compete” shall start on the Agreement
Date and end on the last day of the Severance Period.
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Edwards
acknowledges that as part of his employment with the PHH Group, he
had access to information that was not generally disclosed or made
available to th
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